Today, a lawyers malpractice insurance policy is usually written with several different types of ancillary coverages included in the policy. These are benefits that are in addition to the coverage for the actual or alleged act of malpractice.
One of these benefits found in most policies is coverage for disciplinary proceedings. Based upon what I have seen, the disciplinary coverage is one of the most beneficial coverages in the ancillary category. Most policies that offer this type of coverage will have a sublimit available to the insured. This sublimit of coverage can range anywhere from $10k to $250K, some will offer this in the form of a per proceeding limit with a policy maximum while others will offer the limit as a policy aggregate.
Also, some carriers will specify that the deductible will apply while others will specify that the deductible does not apply. A nice feature. Accessing this type of coverage is similar to reporting a claim, you must report to the carrier as soon as you are aware of the disciplinary action against you. Late reporting can cause declination of coverage.
Having to appear or to report to the disciplinary board can be nerve racking experience. If this happens to you make sure you retain counsel to assist you and notify your insurance carrier to report the issue. Don’t represent yourself, obtain counsel and use your policy coverage to assist with the costs.
When purchasing something, Everyone wants a good deal right? Same is true for your legal malpractice insurance. You want the coverage that you need but you don’t want to overpay.
I’ve been helping lawyers for more than 30 years purchase legal malpractice insurance and I have seen the good and the bad when insureds shop for their legal malpractice insurace.
Here are a few do’s and don’ts when shopping your legal malpractice insurance:
Do use a broker that can shop more than one legal malpractice carrier. Let one broker obtain multiple quotes. Involving more than one broker can be confusing not only for you but for insurance carriers if they receive multiple submissions for the same risk.
Don’t change carriers every year. Lawyers malpractice policies are written on a claims made basis and switching carriers every year can be an issue when it comes to claims reporting.
Do take into consideration your personal circumstances before changing carriers: are you retiring soon? Most carrier require that you be insured with them for 3 consecutive years to qualify for a free retirement tail. Retirement tails can be expensive!
Don’t base your decision strictly on price. You have heard it before I know, but it is true. There is more to it than just the pricing.
Do read the policy before changing carriers. Make sure you are getting what you asked for. Things like prior acts coverage, career coverage, exclusions are often overlooked
Don’t shotgun your application to several carriers or brokers that you know or may have heard of. There are many carriers that don’t have an interest in writing your coverage, so why take the time and apply. Your broker should know what carriers are interested in writing a policy that covers your specific exposures.
Switching legal malpractice carriers is no small matter. Remember it protects your reputation and protects your clients too. If you’re contemplating making a change, do it right.
Did you ever receive a certified letter advising you that your malpractice insurance has just been non renewed? I know that it is not a pleasant feeling, but what should you do?
First thing is don’t panic. You’re not alone. It happens probably more than you realize. Especially in today’s market.
Second, Call your broker if he or she has not already called you. Find out the specific reason why you received the non renewal. Confirm the non renewal is valid. There are many situations where the non renewal occurs: Sometimes it is simply that the current carrier is no longer writing business in this state, sometimes it has to do with your claims history, sometimes it has to do with a certain area of practice you perform or some other type of valid reason.
Third, work with your broker. Create a plan to approach the marketplace, select carriers with your broker to approach that will offer the best options at obtaining renewal terms, order loss runs and update the firm information to provide a clear and updated picture of your firm.
Lastly, do not “shotgun” your application to all carriers that you hear of or know. This could result in confusion in the marketplace, resulting in several declinations from carriers and creating unnecessary delays in securing terms. If you’re with the right broker, he/she should know what carriers to approach that provides you the best opportunity to secure renewal terms.
Navigating through a non renewal can be confusing but following the steps I outlined will make it a little easier.
Are you planning on retirement in the next few years? If so, good for you. I’m sure you’re looking forward to it! However, there are many things you need to complete prior to you closing or selling your office. I want to discuss this issue from an insurance standpoint only.
When you retire or close your office, the exposure from your cases stays with you. Unfortunately that exposure doesn’t retire when you do. You need to be certain that when you do walk out that door for good that your malpractice insurance remains in place so that you are covered for future claims that may be filed against you from past cases or acts.
Before you retire or sell your practice, you should contact your broker and make sure that you have the right under the policy to purchase tail coverage or what is called an extended reporting provision. Exercising this right under the policy allows you to report to the carrier any claims that may arise against you after retirement provided the alleged error occurred during the time you were insured or after any retro date that was listed on your policy.
This tail provision usually comes with several options with regards to the length of the tail or how long the tail will last. Depending on the policy, time frames can range from 1 year to an unlimited time frame. The longer the time period of the tail coverage the more expensive the cost. It is important to keep in mind that the time in which to exercise or purchase these extending reporting provisions are short.
Usually in Pennsylvania, you have 60 days from the expiration date of your current policy or from the date you retire and or sell your practice. You cannot purchase the extended reporting provision after the time frame expires. Basically it is a one shot deal.
Lastly, most policies now contain a “retirement provision” where if you satisfy certain policy requirements, the tail coverage can be free of charge. Otherwise there is usually a charge associated with it. This should be discussed with your insurance guy before you retire.
Whether free of charge or not, tail coverage when you retire and or sell your practice is a vital step in that process. Do not walk away from your practice without first making sure you are covered for your past professional acts. Having tail coverage will help to ensure a happy retirement.
Have any questions about legal malpractice insurance? Contact INF today at 412-563-2106.
What is a hammer clause in a legal malpractice insurance policy?
It’s a great question that I get asked a lot. Simply put, a hammer clause in a legal malpractice policy is the carrier’s ability to force you to settle a claim that you really don’t want to settle.
How does the carrier do this?
The carrier basically just says, look, we can settle this claim for X number of dollars. You say, well, no, I don’t want to settle it for X number of dollars. And the carrier says, okay, we won’t settle it, we’ll keep fighting it, but if the end result is a settlement larger than what we could have settled it for back here, you’re responsible for the difference. You’re on the hook.
What is step rating and how does it affect my legal malpractice premium?
Simply put, step rating actually causes your premium to increase. Why? Because each step is equivalent to an additional step or an additional year of exposure.
When you’re a new lawyer, or you’re just opening up your firm, you’re down on the lowest level, or the lowest step because you don’t have anything or any ghosts or skeletons in your closet that the carrier is concerned about.
But each year as you practice, you go up each step. And again, the more steps, the more exposure. The more exposure, the more premium the carrier is going to charge.
So simply put, step rating causes your premium to increase.
How do I report claims under my professional liability insurance policy?
This is a great question. You spend a lot of money on a professional liability policy and you want to be sure that when and if you do have a claim to report, that it’s done properly and promptly.
Usually the carrier has three ways for you to report claims. One is by email, two is by fax, and three is by us mail. The contact information for these three methods of reporting claims is usually found in the policy itself or on the declarations page.
Remember, don’t hesitate. Don’t wait. prompt reporting of claims is great. I’m Don I your insurance guy.
What deductible should I choose for my legal malpractice insurance policy?
That answer is really a personal preference. You can go on both ends of the spectrum from a zero deductible, $10,000 deductible or even higher. It really depends on your comfort level.
If you are comfortable having zero deductible and paying a higher premium, because that’s what’s going to happen, then take that.
If you’re not comfortable with paying the higher premium and having a low deductible, take the lower premium and higher deductible. Again, I call it sleep insurance. Whatever you’re comfortable with is what you want to choose.
Many lawyers have some type of ownership/equity interest in or with the clients they serve. Others serve on local nonprofit boards within their community. All do so usually without completely understanding how these outside interests and relationships affect their professional liability insurance coverage.
Most lawyers professional liability policies exclude coverage for those professional services that lawyers provide to clients where the lawyer has an ownership interest in or with that client. Some policies go so far as to include ownership interests of the lawyer’s spouse! Common examples that I have seen on lawyer applications are: ownership in title agencies, real estate, and small businesses of all kinds.
LPL Polices also exclude the acts of the lawyer when acting as a director, officer or board member of entities, including nonprofits. Lawyers are often asked to sit on boards because they ARE Lawyers and are tapped for their knowledge of the law during board meetings. It is very difficult for the lawyer and the board to distinguish when the lawyer is acting as a board member and when and if the lawyer is acting in the capacity of a lawyer and lawyer client relationship. It is easy for the lawyer to get caught in a situation where the board believes he/she provided legal advice however the lawyer believes that he/she provided that advice as a member of the board. In the event that “advice” leads to a bad outcome for the board and eventually ends in a malpractice claim, the lawyer could be without coverage!
Before accepting board positions or investing with or in clients, all lawyers should ask how this relationship will impact the professional liability insurance from both a coverage and cost standpoint.